NEW YORK, July 29, 2008 (PRIME NEWSWIRE) -- AmTrust Financial Services Inc. (Nasdaq:AFSI), today reported net income of $26.4 million and gross written premium of $301.1 million for the second quarter 2008. Additionally, operating earnings for the second quarter of 2008 was $27.7 million. Operating earnings is a non-GAAP financial measure defined by the Company as net income excluding realized investment gains and losses, net of tax.
Gross written premium in the second quarter 2008 increased by $91.1 million to $301.1 million or 43.4% from $210.0 million in the second quarter of 2007. Due to the Company's cession of premium to Maiden Insurance Company (Maiden), net written premium was $132.1 million for the second quarter of 2008 compared to $163.5 million for the second quarter of 2007. The Company's agreement with Maiden, which became effective July 1, 2007, generated $35.2 million of earned ceding commission for second quarter 2008 and continues to enable the Company to leverage its balance sheet, increase its writings, decrease its expense ratio, and most importantly, increase its return on equity.
Second Quarter Overview:
The Company reported operating earnings per basic share of $0.46 for the second quarter of 2008, an increase of 48.4% from the second quarter of 2007. Net income for the second quarter 2008 was $26.4 million, or $0.44 per basic share.
Second Quarter and Six Months Highlights:
* Quarterly operating earnings per basic share was $0.46 ($0.31 in 2007) * Quarterly earnings per basic share was $0.44 ($0.36 in 2007) * Six months ended June 30, 2008 operating earnings per basic share was $0.89 ($0.60 in 2007) * Six months ended June 30, 2008 earnings per basic share was $0.81 ($0.72 in 2007) * Return on equity for the second quarter 2008 was 26.0% on an annualized basis * Book value per basic share was $6.91 (as of June 30, 2008) * The combined ratio for the second quarter was 81.7% (90.0% in 2007) * The combined ratio for the six months ended June 30, 2008 was 79.6% (89.6% in 2007)
Second Quarter 2008 Results:
Revenue:
Gross written premium for the second quarter 2008 increased by $91.1 million or 43.4% to $301.1 million from $210.0 million in the second quarter 2007. Gross written premium for the six months ended June 30, 2008 increased by $136.1 million or 34.1% to $535.8 million from $399.7 million for the six months ended June 30, 2007. The increases were attributable to both organic growth and the continued successful integration of our recent acquisitions.
During the second quarter the company ceded $168.1 million of written premium and $76.2 million of earned premium to Maiden pursuant to the reinsurance agreement that became effective July 1, 2007. As a result of the cessions to Maiden, net written premium in the second quarter of 2008 decreased $31.4 million or 19.2% to $132.1 million from $163.5 million in the second quarter of 2007 and net earned premium for the second quarter of 2008 decreased by $14.5 million or 11.1%, to $115.9 million from $130.4 million in the second quarter 2007. The cessions to Maiden were offset by $35.2 million of earned ceding commission from Maiden during the second quarter of 2008.
For the six months ended June 30, 2008, the Company ceded to Maiden $251.0 million in net written premium and $140.0 million of net earned premium. After cessions, net written premium in the first half of 2008 decreased $74.6 million or 23.0% to $249.5 million from $324.1 million in the first half of 2007 and net earned premium for the first half of 2008 decreased by $35.7 million or 14.3%, to $213.4 million from $249.1 million in the first half of 2007. The cessions to Maiden were offset by $55.4 million of earned ceding commission from Maiden during the first half of 2008.
Commission and fee income for the second quarter 2008 increased by $4.1 million or 95.3% to $8.4 million from $4.3 million for the second quarter 2007. Commission and fee income for the six months ended June 30, 2008 increased by $5.9 million or 67.0% to $14.7 million from $8.8 million for the six months ended June 30, 2007. The increase in both periods was attributable primarily to reinsurance brokerage fees from Maiden as well as becoming a servicing carrier for the National Council on Compensation Insurance Involuntary Reinsurance Pool in three additional states in 2008.
Net investment income, excluding realized gains and losses in the second quarter 2008, was $14.2 million compared to $13.0 million in the second quarter 2007. Average invested assets for the three months ended June 30, 2008 was approximately $1.5 billion compared to $1.0 billion for the three months ended June 30, 2007. Net investment income excluding realized gains and losses for the six months ended June 30, 2008 increased to $27.7 million from $24.4 million for the six months ended June 30, 2007.
Total revenue in the second quarter of 2008 increased by $18.9 million or 12.4% to $171.6 million from $152.7 million (excluding other investment loss on managed assets) in the second quarter of 2007. Total revenue for the six months ended June 30, 2008 increased by $10.5 million or 3.6% to $303.8 million (excluding other investment loss on managed assets) from $293.3 million in the first half of 2007.
Expenses:
The Company's loss ratio for the second quarter ended June 30, 2008 was 63.9% compared to 65.2% for the quarter ended June 30, 2007. The Company's loss ratio for the six months ended June 30, 2008 was 60.6% compared to 64.0% for the six months ended June 30, 2007.
Policy Acquisition Expense, Salaries and Benefits Expense and Other Insurance General and Administrative Expense less Ceding Commission Revenue for the three months ended June 30, 2008 decreased by $11.8 million to $20.6 million from $32.4 million for the three months ended June 30, 2007. The decrease was primarily the result of $35.2 million of ceding commission from Maiden recognized in the second quarter of 2008. As a result, the expense ratio for the three months ended June 30, 2008 decreased to 17.8% from 24.8% for the three months ended June 30, 2007. Policy Acquisition Expense, Salaries and Benefits Expense and Other Insurance General and Administrative Expense less Ceding Commission Revenue for the six months ended June 30, 2008 decreased by $23.5 million to $40.6 million from $63.5 million for the six months ended June 30, 2007. The decrease was primarily the result of $55.4 million of ceding commission from Maiden recognized in the first half of 2008. As a result, the expense ratio for the six months ended June 30, 2008 decreased to 19.0% from 25.5% for the six months ended June 30, 2007.
Other Matters:
Shareholders' Equity as of June 30, 2008 increased to $414.4 million from $390.4 million as of December 31, 2007. During the quarter, the Board of Directors declared a quarterly dividend of $0.04 per share.
As of June 30, 2008 the Company's debt-to-capitalization ratio was 31.4%. During the second quarter of 2008, the Company entered into a three-year $40 million term loan. Additionally, the Company's has $123.7 million of 30-year trust preferred securities.
Conference Call:
On July 30, 2008 at 10 a.m. ET, the company will hold a conference call that can be accessed as follows:
Toll-free Dial-in: 877.419.6600
Toll Dial-in (Int'l Callers): 719.325.4900
In order to participate in the conference call, you must register at:
http://ir.amtrustgroup.com
A live broadcast of the call will be available on-line at the above website. An on-line replay will follow shortly after the call. In addition, a telephonic replay will be available for seven days and can be accessed by dialing 888.203.1112 or 719.457.0820. Enter replay passcode 6038430.
About AmTrust Financial Services, Inc.
AmTrust Financial Services, Inc., headquartered in New York City, is a multinational insurance holding company, which, through its insurance carriers, offers specialty property and casualty insurance products, including workers' compensation, commercial automobile and general liability; extended service and warranty coverage. For more information about AmTrust, visit www.amtrustgroup.com, or call AmTrust toll-free at 866.203.3037.
The AmTrust Financial Services, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3280
Forward Looking Statement
This news release contains "forward-looking statements" which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those projected as a result of significant risks and uncertainties, including non-receipt of the expected payments, changes in interest rates, effect of the performance of financial markets on investment income and fair values of investments, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the impact of competition and pricing environments, changes in the demand for the Company's products, the effect of general economic conditions, adverse state and federal legislation, regulations and regulatory investigations into industry practices, developments relating to existing agreements, heightened competition, changes in pricing environments, and changes in asset valuations. The Company undertakes no obligation to publicly update any forward-looking statements.
AmTrust Financial Services, Inc.
Income Statement
(in thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Gross premium written $ 301,062 $ 210,020 $ 535,818 $ 399,693
Premium income
Net premium written $ 132,057 $ 163,522 $ 249,499 $ 324,141
Change in unearned
premium (16,112) (33,102) (36,141) (75,029)
--------- --------- --------- ---------
115,945 130,420 213,358 249,112
Ceding commission 35,222 -- 55,406 --
Commission and fee
income 8,375 4,292 14,662 8,782
Investment income, net 14,190 13,019 27,721 24,410
Net realized gains
(losses) (2,135) 4,962 (7,355) 11,022
Other investment gain
(loss) on managed assets -- 2,191 (2,900) 1,901
--------- --------- --------- ---------
55,652 24,464 87,534 46,115
--------- --------- --------- ---------
Total revenue 171,597 154,884 300,892 295,227
--------- --------- --------- ---------
Loss and loss adjustment
expense 74,134 84,999 129,299 159,556
Policy acquisition
expenses 22,691 17,447 40,999 32,030
Salaries and benefits 17,602 9,921 29,646 18,933
Other insurance general
and administrative
expense 15,544 5,004 25,378 12,578
Other underwriting
expenses 2,504 3,427 7,298 6,540
--------- --------- --------- ---------
132,475 120,798 232,620 229,637
--------- --------- --------- ---------
Income from continuing
operations 39,122 34,086 68,272 65,590
Other income (expense):
Foreign currency gain
(loss) (15) 629 144 119
Interest expense (5,541) (2,531) (8,170) (4,335)
--------- --------- --------- ---------
(5,556) (1,902) (8,026) (4,216)
--------- --------- --------- ---------
Income from continuing
operations before
provision for income
taxes 33,566 32,184 60,246 61,374
Provision for income
taxes 7,216 8,597 14,533 16,599
Minority interest in
net loss of subsidiary -- 2,191 (2,900) 1,901
--------- --------- --------- ---------
Net income available to
common shareholders $ 26,350 $ 21,396 $ 48,613 $ 42,874
========= ========= ========= =========
Operating earnings(1) $ 27,738 $ 18,171 $ 53,394 $ 35,710
========= ========= ========= =========
Earnings per common
share:
Basic earnings per share $ 0.44 $ 0.36 $ 0.81 $ 0.72
Diluted earnings per
share $ 0.43 $ 0.35 $ 0.80 $ 0.71
Operating earnings per
basic share $ 0.46 $ 0.31 $ 0.89 $ 0.60
Weighted average number
of basic shares
outstanding 59,989 59,959 59,979 59,959
Weighted average number
of diluted shares
outstanding 61,001 60,535 60,960 60,297
Combined ratio 81.7% 90.0% 79.6% 89.6%
Annualized return
on equity 26.0% 23.1% 24.2% 23.8%
AmTrust Financial Services, Inc.
Balance Sheet Highlights
(in thousands)
(Unaudited)
June 30, December 31,
2008 2007
----------- -----------
Cash, cash equivalents and investments $ 1,547,758 $ 1,289,600
Premiums receivables 394,931 257,756
Goodwill and intangible assets 101,832 53,232
Total assets 2,996,954 2,322,794
Loss and loss expense reserves 823,023 775,392
Unearned premium 712,391 527,758
Trust preferred securities 123,714 123,714
Total stockholders' equity $ 414,449 $ 390,386
AmTrust Financial Services, Inc.
Non-GAAP Financial Measure
(in thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------- -------------------
2008 2007 2008 2007
-------- -------- -------- --------
Reconciliation of net
income to operating
earnings:
Net income $ 26,350 $ 21,396 $ 48,613 $ 42,874
Less: Net realized gains
(losses) net of taxes (1,388) 3,225 (4,781) 7,164
-------- -------- -------- --------
Operating earnings (1) $ 27,738 $ 18,171 $ 53,394 $ 35,710
======== ======== ======== ========
Operating earnings per
common share:
Basic earnings per share $ 0.46 $ 0.30 $ 0.89 $ 0.60
Diluted earnings per
share $ 0.45 $ 0.30 $ 0.88 $ 0.59
(1) Net operating income is a non-GAAP financial measure defined by
the Company as net income excluding realized investment gains and
losses, net of tax, which result primarily from changes in
general economic conditions, which provides a useful indicator of
trends in the Company's underlying operations.
AFSI-F